Trump EO Lays Out a Roadmap for Drug Pricing Action
Summary
New Executive Order on drug pricing revives earlier Trump proposals and also suggests new approaches for Medicare and states.President Trump issued an Executive Order (EO) on April 15 directing future regulatory action to lower prescription drug prices.
“The new drug pricing EO is noteworthy, both for what it revisits and what it excludes. There is no mention of broad-scale rebate reform, for example, with the focus shifting instead to purchasing, PBM [pharmacy benefit manager] reform, and negotiation strategies,” said Milena Sullivan, Policy Practice Director in Avalere Health’s Advisory capability.
The EO supports changes to program guidance under the Inflation Reduction Act’s (IRA’s) Medicare Drug Price Negotiation Program. It also signals forthcoming proposals impacting the broader Medicare program, PBMs, and states. For more details, see the range of directed actions and corresponding deadlines below.
| Topic | Directed Action | Deadline |
|---|---|---|
| Inflation Reduction Act (IRA) | Directs the HHS Secretary to propose and seek comment on the negotiation guidance for Initial Price Applicability Year (IPAY) 2028 in a way that improves the transparency of the negotiation program, prioritizes the selection of drugs with high costs to Medicare, and minimizes the impact on innovation. The EO also sets higher expectations for savings outcomes for IPAY 2028 than applied the first year of negotiations. | 60 days |
| Directs the HHS Secretary, the Office of Management and Budget (OMB) Director, the Assistant to the President for Domestic Policy, and the Assistant to the President for Economic Policy to provide recommendations to stabilize and reduce Part D premiums. | 180 days | |
| Directs the HHS Secretary to work with Congress to modify the negotiations program to align the handling of small molecule and biologic products under the IRA. | No specified timeline | |
| CMMI | Directs the HHS Secretary to develop and implement a rulemaking plan and select for testing a drug pricing model for drugs and biologics covered by Medicare, including those not subject to IRA negotiations. | 12 months |
| Hospital Drug Payment/340B | Directs the HHS Secretary to publish a plan and conduct a survey to align Medicare payments for Part B drugs with hospital acquisition costs. | 180 days |
| Medicaid | Directs the HHS Secretary, the OMB Director, the Assistant to the President for Domestic Policy, and the Assistant to the President for Economic Policy to provide recommendations to improve Medicaid rebate accuracy, value-based payments, and support state-level drug cost management. | 180 days |
| Life-Saving Medications/340B | Directs the HHS Secretary to act to ensure that health centers receiving federal grants provide insulin and epinephrine at discounted prices at or below 340B discounted prices to eligible low-income and underinsured individuals. | 90 days |
| PBMs | Directs the HHS Secretary, the OMB Director, the Assistant to the President for Domestic Policy, and the Assistant to the President for Economic Policy to provide recommendations to promote a more transparent, efficient, and competitive drug value chain. | 90 days |
| Directs the Secretary of Labor to propose regulations under the Employee Retirement Income Security Act of 1974 (ERISA) to improve transparency into direct and indirect compensation received by PBMs. | 180 days | |
| Drug Approvals/ Access | Directs the HHS Secretary, via the FDA Commissioner, to recommend ways to accelerate the approval of generics, biosimilars, combination products, and second-in-class brand medications. It also calls for a plan to improve the process for reclassifying drugs to OTC status. | 180 days |
| Drug Importation | Directs the HHS Secretary, via the FDA Commissioner, to initiate efforts to streamline and improve the process by which state plans for drug importation are approved. | 90 days |
| Site Parity | Directs the HHS Secretary to evaluate and propose regulations to ensure Medicare payment does not encourage a shift toward more expensive settings of care, such as hospital outpatient departments. | 180 days |
| Anti-Competitive Behavior | Directs the HHS Secretary to conduct joint public listening sessions with the Departments of Justice and of Commerce and the Federal Trade Commission, and to issue a report with recommendations to reduce anti-competitive behavior among pharmaceutical manufacturers. | 180 days |
Drug Pricing EO and Medicare Drug Price Negotiation Program
The EO signals potential future changes in the Trump administration’s approach to the Medicare Drug Price Negotiation Program with the objective of achieving more savings compared to the first year of the program under the previous Biden administration.
“Many stakeholders were critical of the results of MFP [Maximum Fair Price] round 1, so it is no surprise the new administration would prioritize trying to get a better deal. If the MFP isn’t better than what plans negotiate today, patient and plan costs can increase even if the government sees savings,” said Megan West, Managing Director.
Potential changes identified in the EO could focus on program transparency, prioritizing negotiation of high-cost drugs, and minimizing the negative impacts on pharmaceutical innovation. The EO also pledges to work with Congress on aligning negotiation selection rules for small molecule and biological products—an issue that has gained interest in recent months following introduction of the EPIC Act in Congress.
“There is some speculation that the EO may be signaling a shift away from gross costs to net when calculating Medicare’s spend on negotiation-eligible products. This would be a major shift and, coupled with potential legislative changes like the EPIC Act, could drastically shift the timing of selection risk for individual products,” said Ashley Flint, Principal.
Drug Pricing EO’s Effects on Medicare
The EO directs government officials to work on alternatives to a Biden administration demonstration for stabilizing standalone Prescription Drug Plan (PDP) premiums in Medicare Part D. Without the demonstration, the average premium for standalone plans would have increased considerably in 2025.
“Part D benefit enhancements under the IRA and other market dynamics have put pressure on premiums for standalone PDPs. Low premiums are a driver of enrollment in Part D, and the demo has helped mitigate premium increases for 2025. Action on the demonstration from CMS is likely to significantly shape plan decisions to stay competitive in the PDP market for 2026 and beyond,” according to Kylie Stengel, Associate Principal.
Stakeholders were also put on notice of a future Center for Medicare and Medicaid Innovation (CMMI) demonstration focused on high-cost drugs in Medicare, including newer drugs not subject to Medicare negotiation. In the prior Trump administration, CMMI proposed international reference pricing for Part B drugs under a “most-favored nation” approach.
“The reference to medicines not subject to Medicare negotiation feels significant, since that would include Part B and Part D medicines. Medicare spends more on medicines in Part D than Part B, so a broader approach could achieve more savings, which is critical to longevity for a CMMI model,” said Lisa Joldersma, Strategic Advisor.
Drug Pricing EO’s Impact on PBMs
With PBM reform stalling in Congress at the end of 2024, the EO prioritizes developing recommendations to promote a more transparent, efficient, and competitive prescription drug supply chain. These priorities are consistent with previous congressional efforts. One specific proposal is for the Department of Labor (DOL) to issue regulations improving transparency for self-funded (ERISA) plans from PBMs—an idea first raised to DOL in 2014.
“This focus on transparency and PBM practices continues a key theme that we saw under the previous Trump administration. It will be critical for stakeholders to monitor further developments, both administratively and legislatively, that could significantly impact the drug supply chain,” according to Emily Donaldson, Principal.
Drug Pricing EO’s Impact on States
The EO aims to support states in managing Medicaid drug spending, ensuring manufacturers pay “accurate Medicaid drug rebates,” and promoting innovative payment arrangements.
“The EO’s Medicaid proposals signal continued interest in bringing novel drug payment solutions to states, building on value-based purchasing and multiple Best Price flexibilities advanced in the administration’s first term with the ability to shape the future of the Cell and Gene Therapy Access Model currently focused on sickle cell disease,” said Margaret Scott, Principal.
Finally, the previous Trump administration established pathways for state importation programs. Some states have advanced through the process, but none have been able to implement a plan to date. The EO calls for a streamlined process for approval of state importation plans “without sacrificing safety or quality.” States have continued to debate importation programs this legislative session.
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Avalere experts have deep knowledge of past proposals and the current trends driving policy and advocacy. To learn more about how the EO policies could take shape, including their impact on your business, connect with us.
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